Wall Street futures and FTSE fall after shock US job numbers

A shocking low US employment number has sent shares tumbling as the world's biggest economy shows no signs of recovery despite all the financial stimulus sent in its direction.

Dow Jones futures - up 31 points before the figures - are now down 106 points while the FTSE 100 has done a major U-turn, down 57.16 points at 5997.39 having been as high as 6084 earlier.

Despite yesterday's optimism following weekly payroll figures, the non-farm numbers showed a jobs rise of just 18,000 compared to expectations of something north of 100,000. To make matters worse May's figure of 54,000 - itself a major disappointment - has been revised down to 25,000.

President Obama, already struggling with the country's massive debts, had already been reported to be commenting later on the job numbers, which seemed to indicate they were either very good or very bad. We now know which one it was. Joshua Raymond, chief market strategist at City Index, said:

The question now will be what will the US Federal Reserve do? It's likely that interest rates in the US will track a similar behaviour to the Bank of England and be maintained at low levels to encourage spending and growth. The main question will be whether Ben Bernanke, the Fed Chairman, is getting convinced that they need to be looking more into the possibility of a third round of quantitative easing and if so, in what size, method and time frame. Today's jobs figures for June pose more questions than answers and as such, stock markets and the risk on/risk off mode that investors appear to be switching between almost on a weekly basis is likely to remain volatile.

To add to the global worries, European banks are under pressure ahead of the release of the latest stress tests, while fears of Eurozone contagion have reached Italy, not helped by reports that Italian economy minister Giulio Tremonti, had been drawn into a corruption scandal. Kathleen Brooks at Forex.com said:

Italian politics has been tainted by scandal in recent months, and the last thing it needs now is a political crisis to give investors reason to ditch Italian debt a la Greek, Irish and Portuguese style.

There are some bright spots in the UK market, with Marks & Spencer up 2p at 378.6p on hopes of a positive trading update next week. Next is also benefitting, up 13p at £24.11.

Imperial Tobacco is up 25p to £21.78 on hopes of an end to a Spanish cigarette price war which has hit the company's financial performance. Last week Imperial raises prices once more and analysts were waiting to see if rivals followed suit. It now appears that Philip Morris has indeed fallen into line and lifted prices.

But BSkyB continues to fall, down 41p at 771p as a long delay to any News Corporation takeover seemed increasingly likely in the wake of the News of the World phone hacking scandal.

Among the mid-caps Spirent Communications, the telecoms testing company, has fallen 11p to 139.8p after profit warnings from two US rivals Ixia and Aeroflex. Charles Brennan at house broker RBS said:

While some of the issues (notably for Aeroflex) appear to be stock specific, the latest set of profit warnings from within the telecoms testing market starkly underlines some of the short term challenges and patchy end market demand. We continue to expect solid second quarter numbers for Spirent, with ongoing mobile growth offsetting a more challenging environment in infrastructure spending. However, clearly management comments on the outlook will be important.